RPT-UPDATE 6-Obama digs in heels, refuses to negotiate debt ceiling

January 14, 2013|Reuters

* Raises stakes with White House news conference

* Debt ceiling deadline looming closer

* Republicans want spending cuts

By Mark Felsenthal and Matt Spetalnick

WASHINGTON, Jan 14 (Reuters) - President Barack Obama onMonday rejected any negotiations with Republicans over raisingthe U.S. borrowing limit, accusing his opponents of trying toextract a ransom for not ruining the economy in the latestfiscal fight.

At a White House news conference called to promote hisposition on the budget, Obama vowed not to trade cuts ingovernment spending sought by Republicans in exchange forraising the borrowing limit.

"What I will not do is to have that negotiation with a gunat the head of the American people," he said.

With an agreement to prevent the economy falling over a"fiscal cliff" barely two weeks old, Washington has alreadybegun skirmishing over a new fiscal issue: the debt ceiling,which fixes a limit on how much the government can borrow.

The United States could default on its debt if Congress doesnot increase the borrowing limit, a prospect Federal ReserveChairman Ben Bernanke warned against in separate comments onMonday.

Obama has tangled repeatedly with Congress over budget andspending issues, and on Monday he said Republicans would bearthe responsibility for the consequences of a default.

"They can act responsibly, and pay America's bills or theycan act irresponsibly, and put America through another economiccrisis," he said. "But they will not collect a ransom inexchange for not crashing the American economy."

Republicans want Obama to cut some spending to rein in thedeficit before they agree to raise the debt limit again.

Obama must get "serious about spending and the debt limit isthe perfect time for it," Senate Republican leader MitchMcConnell said. "The American people do not support raising thedebt ceiling without reducing government spending at the sametime," said Republican John Boehner, the House ofRepresentatives speaker.

The last debt ceiling fight, in 2011, upset world financialmarkets. Obama cast the borrowing issue as one that will affectmany Americans and sensitive industries.

"If congressional Republicans refuse to pay America's billson time, Social Security checks and veterans' benefits will bedelayed. We might not be able to pay our troops, or honor ourcontracts with small business owners. Food inspectors, airtraffic controllers, specialists who track down loose nuclearmaterial wouldn't get their paychecks," he said.

Obama reminded Republicans that he won the November electionpartly on his approach to fiscal issues.

The debt limit is one of a trio of deadlines looming aroundthe end of February, including automatic deep spending cuts thatwere temporarily put off in the "fiscal cliff" deal, and the endof a stopgap government funding measure.

A number of Republicans have said they would be willing toallow a U.S. debt default or a government shutdown to force theObama administration to accept deeper spending cuts than theWhite House would like.

Obama's unexpected news conference could have been apre-emptive strike aimed at influencing strategy sessions amongRepublican lawmakers scheduled for later this week.

The Treasury Department warned on Monday that the UnitedStates will run out of ways to prevent a default in mid-Februaryor early March if the $16.4 trillion ceiling on borrowing is notraised.

NOT A "DEADBEAT NATION"

Obama said he would agree to talk about steps to trim theU.S. budget deficit, but made clear he wants to keep thatdiscussion separate from the debt ceiling increase.

"The issue here is whether or not America pays its bills,"he said. "We are not a deadbeat nation. And so there's a verysimple solution to this: Congress authorizes us to pay ourbills."

He held to his position that deficit reduction shouldinclude measures to raise revenue and not come from spendingcuts alone.

Republicans have rejected that approach, saying the "fiscalcliff" deal, which raised taxes for the wealthy whilemaintaining low tax rates for most Americans, should have put torest any more discussion over tax increases.

Fiscal issues loomed large during what was the final newsconference of Obama's first term, which came a week before aninauguration ceremony that will launch his next four years.

Fights with Congress over taxes and spending haveovershadowed much of his domestic agenda during most of the lasttwo years, with the president facing legislative gridlock thatshows little sign of abating.

Obama raised the specter of a severe setback to the U.S.economy if congressional Republicans persist with the threat ofa debt default.

"It would be a self-inflicted wound on the economy," hesaid. "Even entertaining the idea of this happening, of theUnited States of America not paying its bills, is irresponsible.It's absurd."

Treasury Secretary Timothy Geithner, top White Houseeconomic adviser Gene Sperling and Obama senior adviser ValerieJarrett later held a conference call with three dozen businessleaders to discuss the president's fiscal plans and insist thatCongress must raise the debt limit "without drama or delay," aWhite House official said.